• Professional News
  • 04 July 2013

EU agrees to withhold CO2 permits

The EU Parliament has approved an amendment supporting the EU Commission's temporary 'back-loading' of 900 million CO2 allowances. The aim is to stabilise the EU carbon market. 

On 3 July 2013, the EU Parliament voted to back a slightly amended version of the EU Commission's proposal to ‘back-load’ permits in the EU emissions trading scheme (EU ETS) to stabilise the European carbon market. With their positive vote, MEPs support the EU Commission to temporarily withhold 900 million CO2 allowances.

The background to the proposal is a decline in carbon prices which are currently much lower than the estimated 30 euro per tonne set when the emissions trading system was launched in 2005. The economic crisis has played a major role in the carbon price drop as the European industry sectors have curbed their demand for CO2 permits significantly.

Combats climate change
The amended proposal allows for the EU Commission to withhold up to 900 million CO2 permits as a one-off event in the period 2013 to 2020. Moreover, 600 million of these permits must be entered into a fund established to reduce emissions in the energy-intensive industries.

The EU Commission has committed itself to withholding permits only if the tightened environmental requirements do not cause a significant number of companies to relocate outside the EU. According to the proposal, the back-loading – which will postpone part of the member states' allocation of permits to their industries for several years – must be a single occurrence. Moreover, the proposal contemplates a linear reintroduction of withheld permits releasing them into the carbon market one year after the back-loading took place.

The EU Parliament anticipates that the proposal will increase the incentive to cap CO2 emissions among European companies and, as a result, combat climate change.

View the proposal here.

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